Forced Rankings- What could be the Way Forward

Published by MBA Skool Team, Published on December 19, 2014

Forced Ranking system for employee appraisal has been around for quite some time now. But, sensing the problems it brings into the organization, companies are now trying to move away from it and bring in an absolute ranking system. First, let us see some of the reasons why forced ranking was made famous decades ago by former GE CEO Jack Welch. In this system, the performance of employees is assumed to follow a bell curve. Hence, about 10% are ranked the best or ‘above expectations’ as managers call it, the bottom 10% are the poor performers or ‘below expectations’ and the middle 80% are the average performers or ‘meet the expectations’ category. Although the percentage allotment may vary from company to company, the ratio roughly remains the same.

The companies find it easier to follow this approach rather than absolute ranking primarily because these rankings are linked to the bonuses shelled out and if the number of people getting the bonus is fixed, the companies can have a fixed budget allotted at the beginning of the year. Also, it is any easy way to find out and reward the top performers and encourage the weak ones to leave. In this system, both, the managers and the employees have no place to hide. They are literally forced to have performance related discussions which they would have otherwise avoided. All said and done, the outcome of this system may be good but not the process.

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The first major con in using forced rankings is that it compares apples to oranges. An A grade performer in one team may be working a lot harder than an A grade performer from another team, but, they are the best performers in their respective teams hence treated equal. This unfairness creates demotivation and disengagement among employees. Another issue that arises is that more than the employee’s performance, it is a test of his relationship with his supervisor. Most of the supervisors are not trained enough to give feedback objectively. They usually go by their gut feeling and may not always be able to articulate the reasons objectively. So, the better rapport one shares with his supervisor, more chances of him getting a better appraisal. Also, it compels employees to compete with each other instead of working in a team. Thus, their personal interests come before the larger interest of the organization. Research proves that most of the employees do not find the forced ranking method fair and transparent. Put simply, the forced ranking system is just a method to hide the flaws in the company’s culture.

Just because something works for GE, does not mean that it would work for everybody else. The environment or the company’s culture should also be prepared to implement it properly otherwise it comes as a dramatic culture shock to the people. First and foremost, the employees as well as the supervisors should be adequately trained to receive and give feedback objectively. Their personal equation with the employees should not hinder their judgment. In spite of the employees being pitted against each other, they should be putting efforts to engage in teamwork and put the organization’s interest ahead of their own. As we can safely assume, being humans, it is difficult to bring in such objectively in real life. Hence a lot of effort and time is required to bring about a complete culture change in the organization.

Research findings prove that after the initial struggle years have gone by, employees choose to stay with an organization not because of the money and other benefits, but, because of the people and the job. People who develop a strong connection with their team and believe that their role allowed them to have a positive impact on the organization are the happiest. Hence the age old belief that monetary benefits alone motivate employees and the work environment is irrelevant is not true. Organizations have started realizing this and have started moving away from the forced ranking system which creates unhealthy competition and compromises on creativity.

Recently, Microsoft eliminated the bell curve and will now put greater emphasis on teamwork and collaboration along with better and frequent feedback to employees about performance. In the absolute ranking system it is essential to have a well-defined set of standards (expected performance) for each task against which they are compared and these standards need to be communicated well in advance to the employees so that they are aware of what is expected from them and act accordingly. Whether this system of humble management works for Microsoft or creates more problems for them can be said only after a few years post its implementation.

All said and done, the fact remains that individuals are inherently individualistic. That is why communism fails and capitalism prevails. Even if we start encouraging teamwork and do group appraisals, the inherent competitiveness between the employees will still be there. The only difference would be that the organization will not encourage it hence might not be that disruptive. So, the lesson learnt here is that the bell curve forced ranking approach works only in the short run, but, in order to look at the long term growth of the organization, the people need to be given space to grow and be creative instead of just focusing all their energy on merely surpassing their colleagues. Not all appraisals should be linked to bonuses. Some mid-year feedback could be used to merely tell the employee about what is expected, where is he going wrong and how he can be improve. That way, employees feel more at home and will try to give their best to the organization.

To sum it up, it is time to force out force rankings and bring in a new wave of creativity and employee satisfaction.

This article has been authored by Piyali Das from NMIMS Bangalore


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